New public chain Canto: reshape DeFi with new stability mechanism

22-07-19 16:27

Read this article in 11 Minutes

AI summary

View the summary

Original author: 0x137, BlockBeats

In the past few years, we have witnessed the development of the DeFi field, from the launch of DAI at the end of 2017 to the blowout growth of DeFi projects in 21. With the rise of Cosmos and the concept of "application chain", more and more underlying public chains optimized for specific fields have emerged.

Canto is an L1 DeFi public chain based on the Cosmos SDK. Promoted by the developer organization Plex, the project aims to drive innovation in the DeFi field and bring more accessibility, transparency and freedom to traditional finance by providing a series of free public infrastructure.

Main components: DEX + CLM + NOTE

During the development of DeFi for several years, three core components have gradually formed in its ecosystem: DEX, lending market and decentralized unit of account. Now, no matter what type of DeFi component they belong to, many projects have made the same decision: issue governance tokens to earn user fees. Canto puts forward a radical concept, even though these core DeFi components exist in the DeFi ecosystem as free public infrastructure to promote the development of other DeFi "app Lego".

Canto's native DEX is built based on the transaction logic of the DeFi protocol Solidly, which supports "stability + volatility" Trading pairs do not charge LP fees. The DEX itself cannot be upgraded and will remain ungoverned. It will run permanently on Canto and will not issue tokens or charge additional fees to prevent predatory rent-seeking behavior.

Canto's lending market CLM draws on Compound's LP Token logic and is governed by CANTO Token pledgers. The main goal of Canto stakers is to create the best DeFi environment for developers and users, so they will not receive interest income from the application layer. All interest paid by the borrower is fully distributed to the lender, and Canto does not withdraw any fees.

NOTE is Canto's native stable currency. Similar to DAI, NOTE also uses an algorithm to adjust the interest rate to achieve price stability. The interest charges charged to stabilize the NOTE price will be used to fund other public infrastructure within the ecosystem.

NOTE: New Stability Mechanism

NOTE is Canto's native stablecoin, which adopts the ERC-20 standard and over-collateralized endorsement mechanism. Different from stablecoins in the traditional sense, a new set of stable mechanisms has been introduced. NOTE’s interest rate algorithm is only centered on $1, and the price is co-integrated with it, but not completely linked. Therefore the price of NOTE will have its own volatility.

All circulating NOTEs will be minted at the time of creation and sent to Canto Lending Market (CLM) contract address. Users can borrow NOTE from CLM by providing USDC, native Token CANTO, ETH or LP Token, etc.

Since the supply of NOTE is fixed when Canto starts and can only be borrowed through CLM To circulate in the market, so the CLM contract will use the adjustment of the interest rate to manage the circulating supply of NOTE. If the market price of NOTE is below $1, the algorithm increases the interest rate to increase the incentive to buy and lend NOTE; if the price exceeds $1, it lowers the interest rate to make selling and borrowing NOTE more attractive. NOTE's interest rate adjustment cycle is 6 hours, with a threshold of 25% of the difference between the instant NOTE and $1.

When creating the world, all NOTEs will be sent to the Accountant smart contract, which can be regarded as The main supplier of NOTE. In order to avoid excessively increasing the supply, CLM will let the Accountant smart contract provide or redeem liquidity when users deposit or withdraw NOTE, so as to accurately calculate the difference between the amount of interest earned by the agreement and the interest paid by the borrower. Interest income from the protocol will be transferred to the community treasury, managed by Canto DAO.

Cross-EVM Governance

We know that many DeFi projects have been deployed on Ethereum or other EVMs, in order for the Canto network to have the right to govern the dApps that have been deployed on the EVM , the team built a custom module called "GovShuttle" that allows dApps on the EVM to read and implement governance proposals from the Cosmos SDK.

Canto stakers can create and vote on governance proposals on the SDK, the proposals and results will be It is transmitted to the storage contract "Port" of the Canto network on the EVM, which will propagate the proposal to the DApp deployed on the EVM. The dApp uses the proposal ID as a parameter to retrieve the corresponding data of the proposal.

In this way, a DeFi application on an EVM can theoretically become a Canto network For the public infrastructure of governance, the only thing the team needs to do is to connect the application's governance interface to the Canto network without other modifications.

Launch Program and Team

Currently, Canto’s official website has not released information about the project team and financing. Plex is an important contributor community of the project, which is composed of a group of developers with high-frequency trading experience, mechanism design and software development background, dedicated to exploring and developing the DeFi business.

Canto team has prepared a release schedule for mainnet launch. The test network will be opened to users on July 16; the main network will be activated on July 18, including GovShuttle, Bridging cross-chain pages, native DEX, CLM, and NOTE-related smart contracts. Liquidity mining will start on July 20, when Canto will launch 5 liquidity pools including USDC/NOTE, NOTE/CANTO, and CANTO/ETH.

Currently the main network testing phase has ended, and the interactive content of this phase is mainly for liquidity mining The mining link is inspected in advance.

Go to the Lending interface of CLM and connect the wallet, click "Add Token" to get a certain amount The test token. Taking USDC as an example, use the obtained USDC as collateral to lend NOTE in CLM. Because NOTE uses over-collateralization, the total loan amount must be less than the collateral value.

Next, go to the DEX page and connect the wallet, select the USDC/NOTE trading pair and provide liquidity for it. After receiving LP Token, users can provide it to CLM as collateral to perform Looping operations and obtain CANTO rewards at the same time.